The latest data reveals a significant rebound in mortgage application volume, reaching its highest level since January, following two consecutive weeks of declines. This increase can be attributed to a surge in refinance activity and a decline in mortgage rates across all loan types, as reported by the Mortgage Bankers Association (MBA) on Wednesday. The market composite index, a key measure of loan application volume, experienced a notable increase of 6.9% for the week ending August 2, when adjusted for seasonal variations.
This increase comes on the heels of a 3.9% decline the previous week and a 2.2% decrease the week before that. Without seasonal adjustments, the index rose 6% compared to the previous week. "Mortgage rates decreased across the board last week, and mortgage application volume has reached its highest level since January of this year," remarked Joel Kan, the deputy chief economist at the MBA. Notably, the refinance index witnessed a substantial jump of 16% from the week prior and soared by 59% on a year-over-year basis.
"Thanks to the drop in rates, refinance applications have increased across all loan types, with veteran affairs loans seeing particularly strong demand," Kan explained. The average interest rate for 30-year fixed-rate mortgages with loan balances of $766,550 or less decreased to 6.55%, marking its lowest point since May 2023, down from 6.82% the previous week.
For mortgages with balances exceeding $766,550, the rate fell to 6.77%, compared to 7.07% the week before. Additionally, the rate for 15-year loans declined to 6.03%, down from 6.27%. Fixed-rate mortgages with 30-year terms backed by the Federal Housing Administration (FHA) saw their rates slide to 6.49%, a decrease from 6.69% the previous week.
The share of FHA loans, typically favored by first-time homebuyers due to smaller down payments, dropped to 13.4% of total applications from 14.2% on a weekly basis. On the other hand, the purchase index recorded a slight gain of 1% from the previous week, when adjusted for seasonal variations. Without adjustments, the index increased just 0.3% compared to the last week, yet it marked an 11% decline year over year. "In spite of the downward trend in rates, purchase activity saw only modest increases, as a rise in conventional purchase applications was counterbalanced by declines in government purchase applications," Kan noted.
"The supply of homes for sale is beginning to gradually increase in certain regions of the country, and potential homebuyers may be waiting to enter the market in anticipation of even lower rates." Overall, the evolving dynamics in the mortgage market reflect a cautious optimism among potential homebuyers who are navigating a fluctuating landscape influenced by changing interest rates and market conditions..